By The Rockledge Group The Covestor Rockledge L2 Portfolio has gained 5.2% year-to-date (net of fees) as of July 7th versus a gain of 8.1% for the S&P 500 Index (SPX). Since Rockledge began managing the L2 portfolio in 2005, the strategy has typical held three sector positions out of nine sector possibilities.These positions are generally chosen from a time-tested analysis of each stock in the S&P 500 index. Rockledge begins its process by evaluating an individual company's fundamentals, taking into account corporate earnings, sales growth, and debt ratios. We also look at valuation measures of these companies individually, then in aggregate, by sector. For example, Rockledge will analyze all the companies in the industrials sector such as General Electric (GE), Honeywell (HON), Boeing (BA), and Caterpillar (CAT) to determine sector valuations. We will also look at macro factors such as U.S. interest rate levels and credit spreads. These macro factors can have a profound impact on an underlying company. Finally, we will examine some technical factors, like stock price changes and moving averages. All of these analyses can help Rockledge to mathematically determine which sectors may be overvalued or undervalued today when assessing the direction of the stock market over the next 4-6 months. Rockledge will rank the nine sectors, high to low, based on our methodology, and will invest in the highest ranked sectors and ignore the lowest rankings. Positions are equally weighted. The L2 portfolio has generally maintained positions in the Select Sector SPDR ETFs such as Industrials (XLI), HealthCare (XLV), Consumer Discretionary (XLY) and Financials (XLF). However, in mid-April of this year, we made some adjustments. The new lineup is focused on these Select Sector SPDR ETFs: Materials (XLB), Energy (XLE), Industrials (XLI), Consumer Staples (XLP) and Utilities (XLU). During June, conditions shifted slightly, and the portfolio swapped out its XLP (consumer staple) and XLU (utilities) positions for technology (XLK). Three of the four sector positions lagged the market for June, with the exception being energy (XLE), which received a boost from the geopolitical tensions in Iraq and Syria. Market data continue to show contrary signals. The final revision of first quarter GDP showed a 2.9% decline. Markets here in the US have been up more than 100% during the past five years without a real setback. There is much talk among market experts of being cautious, of the market running out of gas, and even of pending market crashes.